Columbia Pictures vs. CA - August 28, 1996 (Digests)

Facts: The National Bureau of Investigation has engaged in an anti-film piracy drive by investigating various video establishments in Metro Manila involving cases violating PD No. 49, as amended, including Sunshine Home Video Inc. (“Sunshine”), owned and operated by Danilo A. Pelindario with address at No. 6 Mayfair Center, Magallanes, Makati, Metro Manila. On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a search warrant with the court a quo against Sunshine seeking the seizure, among others, of pirated video tapes of copyrighted films, which the court granted. In the course of the search of the premises indicated in the search warrant, the NBI Agents found and seized various video tapes of duly copyrighted motion pictures/films owned or exclusively distributed by Columbia Pictures, Inc. et al (Columbia et al.) Thereafter, the court has lifted the search warrant which it had therefore issued after a series of motions, up until the CA. In the SC, Sunshine challenged Columbia et al’s legal standing in our courts, they being foreign corporations not licensed to do business in the Philippines. Issue: Whether or not Columbia et al were “doing business” in the Philippines, thus, needs to be licensed before having a legal standing in Philippine courts. Sunshine’s contention: Columbia et al, being foreign corporations, should have such license to be able to maintain an action in Philippine courts. Sunshine point to the fact that Columbia et al are the copyright owners or owners of exclusive rights of distribution in the Philippines of copyrighted motion pictures or films, and also to the appointment of Atty. Rico V. Domingo as their attorney-in-fact, as being constitutive of “doing business in the Philippines” under Section 1(f) (1) and (2), Rule 1 of the Rules of the Board of Investments. As foreign corporations doing business in the Philippines, Section 133 of Batas Pambansa Blg. 68, or the Corporation Code of the Philippines, denies them the right to maintain a suit in Philippine courts in the absence of a license to do business. Consequently, they have no right to ask for the issuance of a search warrant. Columbia et al’s contention: Columbia et al denied that they are doing business in the Philippines and contend that Sunshine have not adduced evidence to prove that petitioners are doing such business here, as would require them to be licensed by the Securities and Exchange Commission. Moreover, an exclusive right to distribute a product or the ownership of such exclusive right does not conclusively prove the act of doing business nor establish the presumption of doing business.

Ruling: No, foreign film corporations do not transact or do business in the Philippines and, therefore, do not need to be licensed in order to take recourse to our courts. As acts constitutive of “doing business,” the fact that Columbia et al are admittedly copyright owners or owners of exclusive distribution rights in the Philippines of motion pictures or films does not convert such ownership into an indicium of doing business which would require them to obtain a license before they can sue upon a cause of action in local courts. Neither is the appointment of Atty. Rico V. Domingo as attorney-in-fact of Columbia et al., with express authority pursuant to a special power of attorney Held: Based on Article 133 of the Corporation Code and gauged by such statutory standards, Columbia et al are not barred from maintaining the present action. There is no showing that, under our statutory or case law, Columbia et al are doing, transacting, engaging in or carrying on business in the Philippines as would require obtention of a license before they can seek redress from our courts. No evidence has been offered to show that petitioners have performed any of the enumerated acts or any other specific act indicative of an intention to conduct or transact business in the Philippines. Article 125 and Article 133 of the Corporation Code of the Philippines, as interpreted, says that any foreign corporation not doing business in the Philippines may maintain an action in our courts upon any cause of action, provided that the subject matter and the defendant are within the jurisdiction of the court. It is not the absence of the prescribed license but “doing business” in the Philippines without such license which debars the foreign corporation from access to our courts. In other words, although a foreign corporation is without license to transact business in the Philippines, it does not follow that it has no capacity to bring an action. Such license is not necessary if it is not engaged in business in the Philippines. No general rule or governing principles can be laid down as to what constitutes “doing” or “engaging in” or “transacting” business. Each case must be judged in the light of its own peculiar environmental circumstances. The true tests, however, seem to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. Authorities agrees that a foreign corporation is “doing,” “transacting,” “engaging in,” or “carrying on” business in the State when, and ordinarily only when, it has entered the State by its agents and is there engaged in carrying on and transacting through them some substantial part of its ordinary or customary business, usually continuous in the sense that it may be distinguished from merely casual, sporadic, or occasional transactions and isolated acts. The Corporation Code does not itself define or categorize what acts constitute doing or transacting business in the Philippines. Jurisprudence has, however, held that the term implies a continuity of commercial dealings and arrangements, and

contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to or in progressive prosecution of the purpose and subject of its organization. As a general rule, a foreign corporation will not be regarded as doing business in the State simply because it enters into contracts with residents of the State, where such contracts are consummated outside the State. In fact, a view is taken that a foreign corporation is not doing business in the state merely because sales of its product are made there or other business furthering its interests is transacted there by an alleged agent, whether a corporation or a natural person, where such activities are not under the direction and control of the foreign corporation but are engaged in by the alleged agent as an independent business. It is generally held that sales made to customers in the State by an independent dealer who has purchased and obtained title from the corporation to the products sold are not a doing of business by the corporation. Likewise, a foreign corporation which sells its products to persons styled “distributing agents” in the State, for distribution by them, is not doing business in the State so as to render it subject to service of process therein, where the contract with these purchasers is that they shall buy exclusively from the foreign corporation such goods as it manufactures and shall sell them at trade prices established by it. Merely engaging in litigation has been considered as not a sufficient minimum contact to warrant the exercise of jurisdiction over a foreign corporation.